The company, which is behind popular labels including C/MEO Collective, Finders Keepers, Keepsake, TY-LR, Jaggar and The Fifth, was this morning listed on the Australian Securities and Investment Commission website as under external administration.
It comes after the former Labor State Government pledged $3.5 million in 2015 to help Australian Fashion Labels secure a bank loan, with Treasurer Rob Lucas confirming to InDaily this morning that the company was yet to fully pay back the debt and some taxpayer funds were now “at risk”.
Administrator Marcus Ayres from Duff & Phelps told InDaily the next 48 hours were “critical” to securing the high-end fashion house’s future, with negotiations currently underway with “prospective suitors”.
“It’s been a pretty tough year for the business,” he said.
“It’s a great Australian business – it’s got a good stable of brands – but the impact of COVID and more broader impacts of what’s going globally have had an impact on their sales, which have come off over the last year.
“The inability to really generate the sales necessary has caused this business to get to where it’s got to.”
Australian Fashion Labels (AFL) was founded in Adelaide in 2007 by husband-and-wife team and South Australian fashion stalwarts Dean and Melanie Flintoft.
The couple is behind the popular online retail store BNKR, launched in 2011, which also had a bricks-and-mortar presence on the corner of Rundle Mall and Pulteney Street for five years before it closed in 2019.
At its peak, AFL employed over 100 staff and sold to over 1700 stockists worldwide, with offices in Adelaide, Melbourne, Los Angeles and Shanghai.
But changing customer behaviour and increasing costs forced the Flintoft’s to cut staff and announce a company restructure in 2019.
Ayres said AFL was now insolvent and would go into administration for about one month.
“They’re down to 57 employees now in sort of a slimmed-down version of the business,” he said.
“They’ve been doing pretty significant adjustments, but that comes at a cost and so injecting new capital into the business is a little bit difficult with these legacy liabilities in the business that are kind of insurmountable at this point.
“We’re basically looking at the next 48 hours to try and get the business into a position where we can at least keep it trading during the administration period.”
Ayres said the company was discussing a proposal for a “deed of company arrangement”.
“That proposal, as I understand… just before we were appointed, included the continuation of all 57 employees in the new business,” he said.
“That new business would be recapitalised and so basically trying to keep the thing afloat to enable that proposal to be put to the creditors and get creditors to make a decision on if they want to go that pathway or not.
“There’s a bit to work through between now and then, particularly some pretty big hurdles that we’ve got to reach or cross in this next 48-hour period.”
Ayres said the 57 employees were mostly based in Adelaide.
He declined to reveal the company’s value.
The decision to go into voluntary administration raises questions about the status of a state taxpayer-funded guarantee to help AFL secure a bank loan in 2015.
In 2015, The Advertiser reported that AFL secured a $19 million bank loan from Adelaide and Bendigo Bank, which was part-guaranteed by a $3.5 million pledge from the State Government.
The loan was instigated as part of the then-Weatherill Government’s $50 million “Unlocking Capital for Jobs Program” for SA-based companies to secure and grow jobs in the state.
At the time, South Australia was the only state to offer the guarantee but similar schemes were already in place in the UK, New Zealand and Canada.
The Advertiser reported that AFL would use its $19 million bank loan to open a flagship retail store in downtown Los Angeles, purchase and upgrade its North Terrace headquarters and launch a new menswear range.
The Marshall Government scrapped the scheme when it came to power in 2018, with Lucas describing it as a “shining example of utter incompetence”.
He said he was advised last year that “not all” of the AFL’s bank loan had been repaid and “some of the taxpayer funds are still at risk”.
He said he was seeking advice on how much taxpayer money is at risk.
Ayres said he was waiting for the bank to advise the outstanding balance.
“The South Australian Government loan, yes there is one that I’ve seen, but I don’t know how it works, that’s more a matter for Bendigo and SAFA (South Australian Government Financing Authority) to work through,” he said.
“If Bendigo calls on that guarantee then presumably I’ll call SAFA just to have a chat to them because they’re prospectively a creditor.”
In 2019, The Advertiser quoted Dean Flintoft citing “changing consumer behaviour and increased costs” for the company’s financial troubles.
“We are changing our business model and doing a bit of a review, the bank is helping us with that and working with us,” Flintoft was quoted.
“From the bank’s point of view we’re profitable, but not profitable enough at the moment, but we are reviewing the model and making some changes.”
InDaily contacted Flintoft for comment.
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